Originally published by Air Cargo Magazine
The news from the recent COAG meeting was that the Low Value Threshold (LVT) would be eliminated altogether so that, in principle, all imported goods would be subject to customs duty and GST. Presumably it was good news for many of the Australian retailers who had lobbied for the change in the belief it would redress an unfair advantage to overseas on – line vendors as well as being good news for State Governments who hope to share in the revenue raised. However, it is fair to say that many others are not quite as happy as the move will add to the cost and complexity of importing goods. The total removal of the threshold would be inconsistent to overseas practice where there is at least some threshold and takes place at the time that the US is considering legal measures to increase its threshold to US $800, close to our LVT.
To date, very little information has been released on how the change will actually be implemented which is not surprising given that the change is only to take effect on 1 July 2017. However, the change creates a number of practical challenges including the following:
- The 2011 Productivity Commission report into the issue included a recommendation that the low value threshold exemption for GST and duty should be reduced "where it was cost – effective to do so". We can only assume that the federal Government has established that the costs and complications associated with the change are outweighed by the revenue to be collected and the other intended benefits.
- Presumably the Government has satisfied itself that the reduction in the threshold does not constitute an increase in duty or the imposition of duty contrary to our FTAs.
- The reduction in duty available for goods under our FTAs will presumably still apply and those FTA also provide that no certificate or declaration of origin is required for consignments of goods below $1,000. However, importers will still need to have evidence of the basis on which they have claimed FTA benefits. This will be a new requirement for many importers of goods in consignments below $1,000.
- The announcement did not address whether the "low value" consignments would now require completion of "Full Import Declarations" rather than "Self Assessed Clearance Declarations" or some other form of Declaration and whether that would require the use of the services of a licensed customs broker. If customs duty and GST is now payable, given the complexities in calculating "value for duty" then Government may well require the Declaration to be produced by licensed customs brokers.
- What sort of compliance regime will be adopted by the Department of Immigration and Border Protection for these new Declarations or will it adopt the same approach as to all other importers who have been paying customs duty and GST?
- Will the Integrated Cargo System be able to handle the new numbers of Declarations?
- Will the Government also require full cost recovery on the processing of the new Declarations which will attract customs duty and GST? Previously the "low value" transactions did not attract the Import Processing Charge (IPC) which meant that the IPC paid by others cross – subsidised the cost to process the low value transactions. If the intent is to equalise the treatment of such low value transactions then surely the IPC will also be charged.
- How will GST and duty be charged on overseas vendors and collected from them? Many overseas vendors are not registered for GST here and being required to pay GST would be a cost which could not be recovered. One proposal is that overseas suppliers with annual Australian sales above $75,000 would be required to register with the ATO and to collect and pay the GST to the ATO. Smaller suppliers may register with the ATO but if not, the un – registered suppliers will not pay the GST so that the GST would need to be assessed by Australia Post or the private cargo provider and the purchaser would need to pay the GST and a processing fee when collecting the goods. Another option would require the credit card provider or the on line sales portal to add and collect the GST at time of sale and remit the GST to the ATO.
Putting to one side the complexities, there is the fundamental question whether the change to the practice is likely to have an impact on overseas purchases. A recent NZ survey found that that for the majority of shoppers, the addition of GST would not change shopping habits.